Insuring the property may be a problem. 

Long story short the seller's lawyer is saying they can provide a title insurance policy with the following exceptions: 1.A disclosure of the pending lawsuit to the Buyer;2.A financial indemnity (only) in the event there is a claim under the policy based upon this lawsuit.My title lawyer has been advising me the whole time to wait for the litigation to end.

Make it clear that he is responsible for insuring the rent is in your hands no later than midnight on the first of each month for the entire monthly rental fee.

Here are my numbers as it sits:Income:$2600Expenses:$650 - (vacancy, repairs, cap ex, management)$250- taxes and insurance$180- owner paid utilities$300 - my cash flowTOTAL: $1380Left to pay monthly mortgage: $1220So given these numbers I can still get this thing to cash flow, and if for some magical reason I could ever get the city to change the rental license back to save the integrity of the property, this would be a home run! 

Do I include the Taxes and Insurance (that he's currently paying?)

What is the yearly cost of insurance?  

I currently work full time as a Insurance agent.

Beyond financing this deal, better credit will save you on insurance costs among other benefits. 

I'm thinking about putting my rental property with the same insurance company that I use for my primary residence so I can get an umbrella policy from them.

Usually you will pay for insurance on individual properties, and yes your liability and fire policy should be much cheaper than a homeowner's policy which is used for people occupying the home.